Budimex S A Shs

I cordially welcome you to discuss the results after the first quarter of 2022. The results were the financial results of the Budimex company. I would like to introduce the people present with me. Mr. President Artur Pielech, president of the FB Service company. Mr. Marcin Wygłowski, financial director, member of the Group Budimex Group. Mr. President Jacek Lech of the Mostostal Kraków company. Ladies and gentlemen, we would like to present what happened in the first quarter of 2022. Key elements in our traditional film summary. I cordially invite you. Oh, I don't know. Oh,

I am a medical director at the Children's Hospital in Wojwoda, St. Nicholas Hospital. And I would like to thank you very much on behalf of all the small patients of our hospital for the necessary wishes that we received from the Budimec group. Everything will be fine thanks to you, thanks to your work, thanks to your support. Glory to Ukraine! so so

Thank you very much.

quite difficult quarter, a quarter full of challenges, both in terms of production carried out on contracts, but also in terms of contracting. We will start our meeting with macroeconomic data. Marcin, I would very much like you to start the presentation.

We start with macroeconomic data. Of course, we will start with inflation. We start with inflation, which breaks records. The planned average annual inflation of the Polish National Bank in 2022 is already over 10%, but I suspect that new forecasts are waiting for us and it is possible that they will still be verified. Unfortunately, most likely at the top. The next years are predicted to be 9.4-2%, respectively in the years 2023-2024. Here we tried to find other forecasts that are on the market. It also looks different. As I can see, banks are more optimistic that this inflation will fall in 2023. Nevertheless, in fact, everything is still ahead of us and there is a lot of uncertainty. We had quite good forecasts for it. post-pandemic, so-called, that after the pandemic there is a big chance of economic growth, economic food, which was crossed, of course, by the war in Ukraine, which caused this inflation, and we also expect that there will be a drop in GDP in Poland. When it comes to construction and assembly production, the year 2021, as you know, is very good, because it is 117 billion zlotys, Basically, the first quarter of the spread gives us a large increase in construction and assembly production. I will show it in the next slides. However, we have not yet attempted to make any forecasts for the year 2022. We are rather expecting a decline. This decline will, however, be caused by certain turbulences that we have on the market caused by the war. lack of personnel, possibly extended term for the implementation of contracts, as well as the new contracts that we analyze and want to sign, we carefully approach, taking into account the fact that there is uncertainty in the market for the prices of building materials. As I said, in the first three months, this assembly and assembly production very well, because it is 27.6%, but when we look at the price of the production of the assembly and assembly, they also grow very strongly and it can be seen that this curve begins to climb up strongly, because in December it was 7.6% and these increases are up to 8.3%, 9.3% in February and in March it reached 10.4%. When it comes to the price of these building materials, it seems that this trend will go up strongly, so we expect further growth. If we try to summarize the construction market in the first three months, of course, we have a very large decline in employees. from Ukraine, although the direct impact on Budimex is small, because we do not have employees, foreigners who work in our company, but there is a very large impact on our subcontractors. The number of foreigners in general in Poland was 484,000 who worked in construction, of which 373 were Ukrainians, and we estimate that about 30% of this population our employees returned to Ukraine to fight. There is a big change in the raw material market. We have an increase in prices. I will talk about prices later. There are possible delays in the implementation of contracts caused by this. Therefore, we try to talk to our customers, that is, we conduct a public dialogue with investors. Of course, we have a lack of materials, which of course causes that there is a large price increase, a lack of staff, which also causes that these works will be carried out with delays somewhere there. We are probably also threatened with contractual penalties and taking into account all this, we are trying to negotiate with customers to try to raise the rewards. Of course, the good news is that the General Directorate has introduced 5% to 10% valuation limit for all contracts that will be implemented in the future. This is a good news. However, we also observe a delay or extended time in general deals of elections, as well as in PKP PLK. From such good news, the Plan for the Development of Energy Sites by the PSF was announced. for the year 2022-2023 32 billion zlotych. Also, such general news is very good. In the case of the prices of selected raw materials or materials that are, the bad news is that they are very expensive. The good news is that they are available. There is no such situation that we suddenly lack building materials. However, of course, the high price will cause that it is a barrier for many of us, as well as for the construction industry, the implementation of contracts in the planned costs. And as you know, our contracts and others are contracts signed at constant prices. And just like concrete very high asphalt and other materials, it looks like little stabilization. However, a large inflationary indicator and this uncertainty, which is still on the international markets caused by the war, may, however, result in the fact that the prices of construction materials will continue to grow.

And summarizing this quarter and events after the quarter, of course, we would divide it into this period before February 24 and after February 24, where this world began to look a bit unpredictable. And what is happening is a bit unpredictable when it comes to the implementation of the works carried out and the purchase of materials. From our perspective, it looks, I would say, It could also be divided into three segments, into contracts already signed and implemented, where the backlog we have is over 13 billion. And this is the moment when we conduct very intense conversations with the orderers, both private and public, as to the valorization or the promotion of the valorization in the contracts already carried out. For this period of transition, where we made offers at the turn of the year 2021-2022, and they have not yet been withdrawn before the 24th of February. And here is such an unexpected situation for us, but a very responsible approach from our side. We did not include agreements worth more than PLN 3 billion, which is very important in our activity, but we approached it very responsibly and decided, after counting these offers again, that the cost of materials increased so significantly that we are not able to maintain profitability on these contracts, and they would even bring losses. So our decision was unambiguous, that unfortunately we are not able to sign these contracts. Another element, the third segment, is what is ahead of us and what happened after February 24, so there was a certain moment of holding the process of trading at the main customers, in the General Directorate and PKP PLK. At the moment, after stabilizing this situation, both these institutions have started the normal trading procedure. We started to submit these offers. We are already submitting these offers with the current prices. These contracts also include increased 10% valuation. They give us such certainty of stabilization and the fact that we will not lose on these contracts. And here we can boast of the fact that at the turn of the last month we took first place in contracts, in three key express print contracts for over PLN 1.2 billion, PLN 200,000. So quite a significant return, despite the fact that at the beginning of the year we did not sign PLN 3 billion, we have already managed to get a contract worth over PLN 1 billion. but with the certainty that we will not lose on these contracts anymore. I would like to move on to discussing the results from the activity after the first quarter, and then of course to sum up what we are still doing and what we are focusing on to increase diversification and also, of course, as far as we can say, to use this situation in this difficult period, We also believe that this situation and the geopolitical position of Poland will help us in diversification. And we also see a chance, not only of a threat, but we also see a chance of the development of our company. Income. We can note that we have raised our income very much after the first quarter versus the previous year. We have achieved revenues of over PLN 1.6 billion. This is a 30% improvement. This was mainly due to very good weather conditions this year, but also due to very good diversification of our portfolio, because this diversification has allowed us to work on buildings in every segment and weather conditions. We have a diversified portfolio. We worked on buildings, we did not have interrupted work. EBIT. EBIT is a bit lower value, we achieved EBIT at the level of 3.6% versus 5% last year. This is due to known reasons, mainly due to the increase in materials. However, looking at the construction industry, we believe that this EBIT achieved and maintained after the first quarter is still a really good value in construction companies, 3.6%, because if we look at GUS data is companies above 250 employees, above 250 people. The average is 4.7%, so even after this difficult situation, after counting contracts, because it should be emphasized that we counted, of course, these contracts, this profitability and this EBIT we achieved at the level of PLN 57 million. Net profit is actually at the same percentage level, it is at the same level as in 2021, 3.7%. which is very important. And here there was an improvement, mainly in the financial part. It was the situation that helped us with the percentage stops and we got better results on the financial activities, balancing practically the same percentage level of net profit in the company. Income according to segments. The construction segment In the construction segment, we mainly increased income. As we can see, similar results for 2020. 1,436,000,000 PLN in the service segment, practically at the same level as in the first quarter of 2021. What helped us was the structure of our portfolio, because it significantly improved the results when it comes to revenues. As for the margin, as I mentioned earlier, the first quarter fell in the construction sector from 4.1% to 3%, mainly due to the increase in the prices of construction materials. As for the service segment, a drop of 13.3% to 8.9%, but it should be emphasized that this is very good profitability. When discussing the service segment of the FB Service Group, President Pielech tells us exactly the situation from which it results. However, in summary of the year, of course, our assumption is that both in the construction segment and in the service segment we want to maintain the established results from the budget of 2022. A very good level of cash position, actually historical, over PLN 3 billion. This is partly the effect of the sale of the Budimex real estate company, but also a very good effect of the activities carried out in the entire Budimex Group. As you know, we have been paying dividends for 13 years. In total, it is already PLN 138 per share. We have the same plan for the year 2022, so we have proposed dividends for shareholders worth PLN 600 million. On May 19, we have and we would like to ask for approval and this is the recommendation of the Board of Directors to pay 100% of the profit for 2021. Our order portfolio is PLN 13.2 billion. We signed a contract worth PLN 1.4 billion in the first quarter. This allowed us to maintain the same portfolio as at the end of 2021. 13 billion zloty. Very well diversified portfolio. It gives us a lot of stability and stabilization when it comes to work. We have provided work for our employees until the end of 2023, and even the first half of 2024. As you can see, it is mainly 44% are roads and hydro-technical contracts. Large orderers and here we are actually focusing solely on the General Directorate of Railways and motorways, so we have very little in our portfolio of self-governmental contracts, which at the moment will be very difficult contracts. Another significant segment, 28% of the railway segment. The main orderer is PKP PLK and this is actually the only orderer, so also a certain and stable investor. The total construction is PLN 3.2 billion, a very large part of our portfolio, 24%. And what is worth emphasizing, these are mainly contracts from the public sector. Seeing this situation and knowing about inflation, we have greatly reduced our portfolio in terms of housing. which is very important, because in the public sector we are able to talk about valorization. All these contracts, most of the contracts contain valorization clauses. And here we believe and fight to increase this clause. And this has the housing segment, of course, a very difficult segment. Here we see our chances and great opportunities for development in the military segment. This year we have already signed contracts for NATO. And these are important contracts, and here we see a great opportunity for development and diversification, transition from the residential area to the military segment. And we know that the geopolitical position of our country gives such opportunities. For sure, for a company built, it is a great chance for development. Industrial segment, stable, PLN 600 million. Here, as we mentioned, we do not want to enter risky contracts. but it should be emphasized that at the beginning of this week we signed a cooperation agreement with an American company on the construction of an atomic power plant. It gives us a chance because we would like to take part in this contract. We know how important this contract is, how significant it is for Poland, but also for sure in the construction sector, in the construction market. As for the signed contracts, 7 billion in 2021, this year 1.4 billion, as we said, it will be our main challenge for 2022. I believe that this will be the biggest challenge when it comes to the entire Budimex group. I believe that despite unsigned contracts, we will be able to sign contracts of similar value every year in 2021. We see a lot of opportunities here in the road and railway segment, but we must also not forget that we are entering the eastern markets. We already have two contracts in the German market. However, on the Czech and Slovak markets, we make offers. There are already a dozen or so offers that we have made. We take this place in the second and third positions. Unfortunately, the bidding procedure on these markets lasts much longer than in Poland. No selection has been made on any of these bidding procedures. We also hope that some of the companies, as we see it in the Polish market, will withdraw from signing these agreements. For us, this is such a good market that Czech and Slovak contracts do not have a valuation limit, so the offers we have made are current, because by valuing prices, they provide the same profitability when making offers. In Poland, so far, these old contracts have been 5% value limit, so after calculating these offers, these prices, we saw that these 5% do not cover our cost of realization and cost of materials. The position of Budimex in the context of macroeconomic risks. First of all, we want to start discussing this segment from the cash position. We have over PLN 3 billion and here I see great opportunities at the moment and in this situation, which takes place, for the development of our company. We are starting all contracts with Poland, which are covered by the Polish Government. These contracts should be financed and here We see such a niche, because not all companies have the opportunity to finance these contracts. We have such a possibility. There we look at our chances for our company, but this is also an element of our strategy, which we talked about at the previous meeting. We want to continue to deal with buying certain companies or accepting certain companies in the service segment. but also in the construction segment on the Czech and Slovak market, but we also want to invest in green energy and here we can boast of the contracts already signed when purchasing the Magnolia company. It is a small contract of two farm-water plants with a capacity of 7 megawatts. but we have also started greenfield contracts, photovoltaic and here we also need funds. And today, having such a cash resource, of course, we have significantly simplified the situation, because so far we have been competing with funds, because the capital was very cheap. Today the situation has changed and today we also have a chance to enter these contracts. The challenges are mainly providing raw materials, maintaining, I would say, the prices contracts that we already have, but also looking for alternative places to get these materials, because of course we recognize and study the possibility of buying materials, especially steel from outside these areas that have so far given us the opportunity to deliver these materials. but also the main challenge that is ahead of us is definitely the contract, because here we will focus on getting contracts, because what my pre-speaker Marcin said, an important element will certainly be that, in turn, the geopolitical position of Poland will cause a smaller amount of private investments, because Western funds or Western investors at the moment, until the end of the war in Ukraine, have stopped investing in it. And here we also see that the housing segment is starting to stop a bit. And here we see some threats, so for sure our challenge will be the contracting of all construction companies. The key role that we see now in front of us is, of course, the dialogue with the investors, the customers, the dialogue with private investors. Here we see a lot of openness, because these companies want to complete these contracts, they want to have them completed on time. are difficult, but they result in increased value or risk division between both parties and payment for contracts. But secondly, as you have seen, 70% of our portfolio belongs to the public sector, but mainly to two investors, PKP, PLK and General. And here with the Ministry of Infrastructure we are conducting very large talks on the issue of increasing valuation of 5% up to 10 or a little higher, so that this division, of course, is carried out, so that this valuation covers our costs. Because, ladies and gentlemen, we do not want to earn on valuation, and we have already said this many times, we want to have costs covered. For any construction company, valuation does not mean profit, but it means covering costs that we see at the moment and which we actually balance every day. Results of the FB Service Group.

Artur. Good morning to you. Results of the service segment of the FB Service Group look, to add to Artur's statement, in such a way that in terms of income, year to year or quarter to quarter, not much is happening. These are practically the same level of income. However, you see a relatively large decline in profitability. At the EBIT level it is 4.4%, at the EBITDA level it is 3.5%. Of course, I agree with the President that it is still phenomenal profitability and I will explain what happened. First of all, we are dealing with such a situation that last year there was a correction of prices on the waste market, on the markets we operate on, especially on the Warsaw market. In the first quarter, after very high unit prices, we implemented the adoption and processing of waste from this market. This changed in the middle of the year. And in this first quarter of 2022, after these adjusted or reduced prices, and because of this slightly reduced profitability, we are implementing these contracts. However, as the President has already said, in the context of the whole year, we expect to bring the profitability to the level of last year, i.e. about 11% EBIT and about 17% EBIT at a comparable, maybe a little smaller, but generally comparable level of income. If we want to do it, First of all, we believe that we will significantly improve the profitability of non-waste businesses, which last year, let's be honest, performed so well. And on the other hand, we are also building new, important, in terms of the development of waste-based businesses. These are mainly, I mean, the service of commercial and industrial customers. I also expect This year, especially in the second half of the year, there is already a very recent effect of 3 million new people living in Poland. They will certainly generate an additional amount of waste. And, ladies and gentlemen, because Poland is a country that has a structural investment gap, i.e. in the processing of waste, i.e. there is too little installation for the processing of waste in relation to needs, to 10% more population will cause that again we will have a situation such that these waste will not just be where to transfer what I expect will also shift to price increase in this segment. Going further, how our three businesses are affected in terms of price increase, which the president has also mentioned, it looks a bit different than in construction. Maybe I'll start with the central part, i.e. the most similar to the construction of our business, or what is the maintenance of road infrastructure. There, indeed, the most visible impact is relatively large. Fuel prices, steel prices, bituminous product prices also affect this business. This is not yet visible in the first quarter. We will certainly gradually observe this in the remaining quarters of the year. However, remember that in our maintenance business, however, the level of material costs and its participation in general costs is much lower than in construction. However, we have a much greater share of personal costs. Therefore, although we are affected by a similar percentage increase, the impact on the margin will be much lower than we expect. in the construction business. Moving on to our most important business, i.e. environmental services, we are actually talking mainly about the impact of fuel prices on this business and this is rather in this part of the business, which is related to waste logistics, i.e. the principles of the business, which does not constitute the strength and profitability of this business line, so I expected that this increase in costs for this business will have a relatively small impact on its profitability. And the third, our smallest business, i.e. maintenance of buildings and the modernization of lighting, the maintenance of buildings is generally marginal. There, the share of personal costs is at the level of 60, sometimes even 70%, so the materials do not have such a big impact. And when it comes to street lighting business, this impact is. However, paradoxically, we are entering this year with an empty portfolio in this business, so we do not have such a situation that the impact of the increase in costs will hit our previously signed contracts. So I want to say that the increase in costs is already in the offer of new offers at new modernization fairs in terms of street lighting, so it will not affect us either. Going further and ending my part, what we are working on. I will focus again on the waste division. What is happening there and will happen the most. First of all, as I said, when discussing the results of the year 2021, we are very much looking forward to closing one M&A transaction and taking over the company from this industry now in the second quarter. We also want to start the study of another company in this industry in the second quarter. We do not slow down the pace when it comes to analyzing targets for adoption. I said before, and I will emphasize it again, we have quite a large, because a dozen-person team to obtain contracts from network clients. I don't think I can tell you exactly what networks we have already acquired. I'm talking about trade networks, but also restaurant networks or networks of, for example, logistics operators in our market. But I think that this business is able to generate even more than 100 million revenues in the waste division for two or three years. Maybe not for a profitability of several percent, such as installations, but I think for a very decent profitability. We will inform you on a regular basis how this business is developing in our structure. We have, I think, since the beginning of the year, more than 100 offers already in this business. And at the very end, I would also like to mention that we are preparing a wide investment package for the modernization and expansion of our current plants, mainly in Lower Silesia and in Małopolska. And I think that these will also be, of course, the investments that we will prepare this year, implement from next year, and we will see their impact on the company's results only in the following years. Thank you very much, I give the floor to my colleague Jacek.

Good morning, I warmly welcome you. A few words about the results of the Kraków Stock Exchange after the first quarter. The first quarter of the Kraków Stock Exchange ended with revenues of PLN 101 million. This is the historical value of revenues, 20% higher than in the first quarter of 2021. Mostostal noted very good results when it comes to contracts. We also noted the historical size in this category. We signed contracts at the level of PLN 215 million and significantly increased the portfolio to be implemented. still holds a very good cash position. At the end of the first quarter, we had PLN 47 million in cash, keeping a very good NTP indicator at the level of PLN 45 million. As for EBIT, taking into account the situation outside our eastern border, taking into account the situation with steel, which I will talk about later, Also taking into account the standards of the Group, Mostostel Kraków has reviewed all contracts, we have verified all budgets, we have updated our budgets so that they consider the current market prices. As a result, the first quarter of Mostostel Kraków ends with a fixed EBITDA. I would also like to convey the information that we have started the negotiation process with all our clients in order to get the funding or participation of our investors in increasing the costs of our projects. To make you aware or show what we have been dealing with this quarter, I would like to show that in just a few weeks the price of steel, especially here I mean the construction sheet, increased from 4.50 to 12 PLN. As for the profiles, this increase was a little smaller, but it was also 100% from 4 PLN to 8 PLN. These are increases that we were not able to predict. This is, of course, caused by the conflict or the war in Ukraine and the collapse of supply chains in this direction. To sum up the quarter in Mostostal, as I mentioned, the historical amount of income of over PLN 100 million. We are focusing on contract, but on a conservative approach to the contract, so that the contract would consider our strategy, which we adopted last year and the current price of steel. We have a safe level of cash, which makes us feel quite comfortable when it comes to this parameter. And, as I mentioned before, we negotiate with all our clients to increase the prices of steel. We have identified 18 valid contracts and we negotiate with 18 of our clients. We have the first successes. I hope that within a few weeks we will complete the negotiation with all our clients. Thank you very much.

Thank you very much. As we can see, the market prospects. Let's start with the positive elements. Our key orderer, the General Directorate of Railways and Motorways. Here, a stable annual order value of over PLN 10 billion. And we see that the plan, which was established by the Ministry and by the General Directorate, is maintained. What is ahead of us is over PLN 180 billion. And despite the fact that there is no approved KPO program at the moment, but also the payment of EU funds, it is still being implemented. In the first quarter, we had a month's break in announcing trade investment in roads, because we wanted both the orderer and the performer, because it was actually carried out in a joint dialogue, We wanted to see what the situation with the materials would look like, what would happen, whether the situation concerning prices would calm down, stabilize. This is already taking place, so these trade fairs have been announced again, so we can see here that General will provide and we can see it after the announcements. This portfolio, which will be implemented, gives us such certainty that by 2030 We have a stable portfolio of orders year-on-year. Here, in green, you can see the values, so it is really significant, I would say, for the entire construction segment. At the moment, we have more than 4,500 fast traffic routes built. The plan is, the Polish plan is to achieve more than 8,000 fast traffic routes by the year 33, so there is still a lot to build ahead of us and we are very happy about it. As for PKP PLK, our second key investor, the year 2021 was a very difficult year due to the lack of funds and approved EU funds, there was a break in the trading procedures, there were only three significant trading procedures, we won one of these contracts, it was the EU station, is currently in the implementation phase. However, this year is a year of challenges for all of us. Despite the lack of PLK funds, it has already announced the bidding procedures. At the moment, there is, I would say, a collapse of these bids and these bids are of significant value. At the moment, three large bidding procedures have been announced. One of them is already over PLN 2 billion. In the plan of the PKP.pl group, there is a contract this year of contracts worth PLN 11 billion, which is very significant and will open this segment a bit for the construction industry. But it should also be mentioned that Prime Minister Morawiecki mentioned that the Kolej Plus program has been updated. Kolej Plus imposes an additional PLN 5.6 billion on the renewal and modernization of railway lines by 2028. When it comes to such a global look at the EU funds, it is worth emphasizing that these EU funds actually have very similar values as the previous perspective. We see that in the previous perspective, 1420 was 126 billion, in this year it is in this perspective, I'm sorry, 21-27, it is over 115 billion, but what we focus on next is the same value, the funds from the KPO come to this, so they increase this value. Road infrastructure is not much smaller, but through its own funds, this scale of investment will be very comparable, even greater. We cannot forget about the instrument connecting Europe in the means of CEEF. These are funds available to all EU countries. And these rail investments that are announced at the moment, these are the investments coming from these funds in CEEF. Here, after receiving a sufficient number of points in the competition, the applicant made an entry into the bidding procedure and here I believe that we, as Poland, have really great opportunities and I believe that we will gain significant participation in these seed funds on our market. Ladies and gentlemen, we do not mention here, of course, about these other investments, but when we look at the whole thing globally, at the promises, what is to be realized in Poland, it will be one large construction site, as it has been until now. because we did not mention CPK here. We have submitted our application to CPK, we have been qualified for the first phase of preparatory work. It is worth mentioning the PSE project, i.e. the development of these energy lines. Here we are very much counting on this investment, over PLN 30 billion, so these will also be investments in which we want to participate. And what I mentioned at the beginning of the presentation, There is a lot of information about the investment in NATO and here we see our possibility and a lot of chance for diversification, further diversification of our portfolio and here for the possibility of obtaining contracts that we have not participated in so far. And we have already entered such contracts this year. And of course, there are eastern markets, so the German, Czech and Slovak markets, and also the Łódź, Lithuanian and Estonian markets. Here we have started pre-qualification on the Via Baltica line. 8 billion zloty, it is a railway line. At the moment, the choice of companies for the trade process is in progress, but we are already taking an active part in it. Of course, we continue to support and help not only the cow market, when it comes to help on our market. We have become very involved as a group and a company, and in general as individuals and our employees as a help for Ukraine. I would like to thank all our employees for their commitment, for their huge commitment and support for the families of Ukraine. We help our employees from Ukraine, their families, we help employees from Ukraine, our subcontractors, but we also personally contribute, and here I would like to thank you as our employees from our own funds for support for Ukraine. We have gathered in the entire group Ferowel and Budimex, a total of over PLN 500,000 of private funds, the second is provided by the company. So it's over a million zloty, which will be paid in total, plus other funds, so from other parts of the support that we organize with the Budimek Group, it's 4 billion zloty. What we did after the first quarter, we managed to organize it. And thanks to the German market, Tadeusz Zmyślony, helped us and we organized, which was really not easy, transport of medicines to the hospital, as you have seen, to the Children's Hospital in Lviv worth PLN 500 million. We had a very big problem with it, because it is very difficult to buy medicines in the European Union, to deliver them outside the European Union. We organized this transport of medicines in this difficult period. It was handed over to Ukraine. In addition, grew from the PZPB group, so the construction group, we bought, we added to the purchase of tickets for Ukraine, to help Ukraine and all the time through other activities we support, we support our partners and we support people in general and we believe that this conflict, which is a very difficult war conflict and this tragic situation will end as soon as possible. We do not forget about these programs that we have been implementing so far. At the moment, in the phase of implementation and completion, there are two more parent zones in hospitals. It is now the 39th, 40th and 41st parent zones, so we are implementing three at the same time. This year, we want to reach 45 parent zones, so in every hospital there should be a place where parents can take care of their children where to sit and spend time. We are currently building in the implementation phase, as you have seen in the film presentation, there is a heart home for the next family, which deals with children. And here we support and we would like to in the near future and in the next quarter to boast that we have finished this investment in building a house. That's all from our presentation. Thank you very much. We are ready for your questions. Today, our presentation is hybrid. We have current guests in the room. Welcome again, but we also have you online. I cordially invite you to ask questions. Of course, we will try to answer all questions. those that we will not have or which we will not be able to give an answer, we will of course give a written answer. Thank you very much for this part of the meeting.

Will someone give the microphone? You mentioned the valuation of contracts new contracts, which have been raised by up to 10%. You also mentioned that there are talks being held with public applicants to adopt such an increase in the value of existing contracts. And how do you estimate the probability, the agreement and also the legal progress of these contracts? Because here we are really investing in contracts already signed. Does it have a chance to be implemented, or is it just a humble request? We have both been participants of the Pentagon at the Building Congress, and it seems that this is not such a presumptuous and easy matter, as Mr. Toska mentioned.

This is a very difficult situation for the performers, but also for the orderers, because we conduct these conversations, we conduct daily dialogue, because it can be said that this is already daily dialogue with the orderers. As you can see, our portfolio, 90% of our portfolio is a public segment. On the one hand, this is very good, on the other hand, it may be a bit worse, because we are counting on such a segment approach, not individual, for every transaction. Structural, which will include all contracts. And here, actually, our key client is the Ministry of Infrastructure. and not the self-government. And here I would divide it into two issues. In the private sector, as I said, we reached an agreement and I think that most of these contracts will be valued and we will share this risk, and probably most of us somewhere we see an agreement in the private sector that the private sector will rather cover the costs that are caused by the war in Ukraine. When it comes to the public sector, of course, These conversations are definitely more difficult due to public orders, due to, I would say, restrictions imposed on the public sector. However, I believe that we will reach some agreement, because otherwise the entire construction industry will be in a very difficult financial and also implementation situation, because we meet with the entire industry and talk about it. I believe that If this support is not obtained by these companies, then of course there is a great threat that part of the contract will be suspended or suspended. And because these companies simply will not be able to realize it. And here we do not have such a guarantee that you ask specifically whether we have something confirmed on the letter that we will get this valuation. No, today we do not have such a guarantee, but these conversations we are conducting, I see that are headed in the right direction and in the right direction. At the time of the dialogue with the clients, there was such a assurance that we would approach each contract individually, which we want to avoid, because it is very troublesome and time-consuming. And we want to systematize it into one procedure, a special bill or a change in the valuation at all. And here we will probably get such approval from the client, I believe that we will get it from the main orderers in the Ministry of Infrastructure. It will be about PKP and the Directorate General and, for example, the Polish authorities. However, I believe that it will be very difficult to obtain valorization in the local governments. And here these medium or small companies may have a big problem with this, because the local governments, each local government, and we have more than 2,500 local governments in Poland, have a practically different contract. In many contracts, valorization patterns were illusory. and in fact did not give the possibility of valuing these contracts. Today, and the governments have a worse situation because they do not have these funds, so here are the next two aspects. One is that today, when making offers on government contracts, we have budgets exceeded by 90% and 95% in turn, these market proceedings are negligible. Because the governments clearly tell us that they do not have funds to these contracts. And here I have a lot of fear that with self-employment contracts it will be very difficult to change. However, with these main contracts, which are implemented by the General Directorate and PKP PLK, I believe that we will reach an agreement and receive this subsidy as all performers.

Good morning, because there are no questions in the room at the moment, I will allow myself to start moderating the questions asked online. We will answer the questions one by one, both before and during the meeting. Of course, if there are questions that repeat the content, we will not read all the repeated questions, where the answers have already been given. I will start with the question from Mr. Adam Zejler, Millennium, Maklerski House. In the context of information about resignation from some of the won fairs, what is the scale of losses of income and in which quarters can you expect?

I mean, I wouldn't like to talk about losses of income today, because as you can see from our history, We are a company that wants to grow every year and increase its income every year and increase its portfolio and diversify its activities. These 3 billion would certainly allow us to increase our backlog again and further develop the company. The fact that we did not sign these contracts worth 3 billion can cause us to be on a similar level, but we will avoid this risk, so it will not have an impact on will probably have a big impact on profitability, because this year we will focus on balancing this and winning the trade-offs, but already with the current prices of materials and also with an increased value of valorization. And I believe that what we assumed will be achieved. However, we will certainly not enlarge our historical portfolio, as we had last year, so the only thing I can say here is that it may rather affect the stabilization of our income level.

Thank you very much. A question from PKO BP. How strong is the competition in the fairs? How many fairs are there at the moment on the market with some reference to segments?

The competition, actually, at the turn of the last two years, has not changed at all. We still notice that the number of companies we compete with is at a very close level. But it is also worth emphasizing that new companies are appearing again, as in the Polish market. The Polish market is very open to all companies, both from the EU and outside the EU. What is surprising for us is that there are various companies from other areas, from Turkey or China, and they make their offers quite aggressively. But what is also worth emphasizing is that companies that have already stabilized their position in the Polish market are now very responsible for making offers. And we also notice that the orderers are much more responsible for the choice of these companies. We hope that, of course, when choosing an offer, it will be very strongly verified whether the company has the resources and equipment and human potential to implement these contracts that it declares. And also whether this offer is made at an economic level that allows it to be implemented.

Thank you. Another question, also from the PKO BP side. Reconstruction of Ukraine after the war. Do we see a chance for business here?

I think it's too early to talk about whether we would like to exist as a construction company on the Ukrainian market. Today we all pray, and in fact we all hope that this conflict in Ukraine, this tragic situation will end. We keep our fingers crossed, we support Ukraine to end this war in Ukraine. And of course we will continue to help them and do everything to end this tragedy as soon as possible. However, of course, as such a large group, a construction company with such a hardware background, If we get such a request or such support or such help, we will definitely give it a hand. We will want to support Ukraine in rebuilding this country.

Thank you very much. A question from the media, Mr. Tomasz Haberko, ISB News. What areas of work are of interest to the company in the construction segment for the army and in nuclear energy?

In terms of military, we are interested in all the segments that I want to develop or that the army or the entire NATO wants to carry out. And here in our history, we have already built all the areas for the army, from the construction of airports to the construction of barracks buildings, to the construction of units and many other elements that I cannot even talk about. However, as for the nuclear power plant, of course, we are very interested in the range of construction and preparatory works. And here we will fight very hard for this range of construction works. We do not want to get into technology, because of course, as a Budimex company, we do not have such experience. However, in this range of construction works or preparatory works, we are very open to cooperation and very willing to cooperate.

Thank you very much. A question from Trigon. This is a question from Młodomozny Stal Kraków. Axel Olmital mentioned that he has launched some of the plants in Ukraine. Can you see a certain stabilization in the raw material market? Have the conditions improved in terms of potential price and volume of supplies? And I will connect this question with another question, which was asked by editor Katarzyna Kapczyńska from Puls Biznesu. From what directions is Grupa Budimex currently planning to buy steel products?

Jacek, can I ask? I would be very careful to say that the situation has stabilized. We have been seeing for two or three weeks greater availability of materials on the market. We have been observing a stoppage of the growth trend for two weeks. Prices are starting to stabilize, and even in the last two weeks they have been falling slightly. However, I would be careful to say that this market has been stabilized. Availability has improved significantly, I fully confirm that. When it comes to directions, we rely on Polish huts and Polish distributors, so of course, when the supply chain was blocked, we were constantly withdrawing even from Spain in order to maintain production processes in our factories. Nevertheless, we focus on the Polish market and on Polish distributors and Polish huts.

Thank you very much. A question from the BDM Mokler House. Can we bring the source of the growth of reserves closer to losses, to contracts? Does it generally apply to the entire portfolio, or maybe it was the influence of some single contracts? Was the growth of reserves on infrastructure or kubatur greater relative to the size of the portfolio? And from what period did these contracts come, which are the most heavily reserved, right? Were these contracts from 2021 or rather older contracts?

This is the effect of resetting our contracts related to the revision that we perform every time we close every quarter. i.e. our respect was taken, as well as the current prices that are on the construction market. And in fact, they apply to the majority of contracts, especially those contracts that are in this initial phase, because these contracts, which are much more advanced, these increases in construction material prices did not affect their results so much, because most of these contracts were protected by contracts in the form of, I don't know, pre-made materials or rehydrated asphalt. However, these new contracts signed have been estimated according to current rates and practically apply to all contracts. So here I can't say which of these segments is more or less exposed. So it would be equal to all these contracts. Of course, it's not like all contracts are for sale. Of course, it is also the case that that fortunately some of the contracts are only in these larger problems, but there are also large contracts that cause us to be able to cover these losses and show a positive result.

Thank you for the answer. A short comment, this is also a question from Trigon. A short comment on this year's CAPEX, especially in the context of investment plans, AFB service and foreign expansion.

When it comes to us, the CAPEX plans have not been reduced. We continue to maintain a high dynamic of investment activities. I will remind you that we plan to spend more than PLN 50 million this year. And I am not talking here about expenses related to M&A transactions. What is included in it? First of all, we estimate that we will be able to renew it and it is a very likely series of maintenance contracts on the roads. And there, of course, we need to renew the equipment. But most of the money we invested in this 50 million kopecks goes to work related to modernization or some ongoing expenses in waste processing facilities. I believe that this dynamic, which I mentioned earlier, will only grow in the coming years, when it comes to CAPEX. But I think we will inform about it in the coming years. As for the markets abroad, I will give Artur a vote.

CAPEX mainly contains in the infrastructure part of Budimex, it is open CAPEX, so equipment and a group of machines. In the entire group, we are building over 600 heavy units. Year after year, we are renewing these units and purchases, so we are investing heavily in rail equipment. This year we want to buy another machine for rail work. This one machine costs over PLN 25 million, so it mainly concerns the purchase of machines.

Thank you for the answer. A question from the PKO side. At what pace is the company going to scale the construction of the OZE segment. In which year would the company like to have a 100 MW portfolio of energy from OZE?

This is a very difficult question. Thank you for this question. However, the current year and the end of last year showed us that these contracts that are currently available on the market They are contracts where we want to buy a ready-made company, or also for implementation, or which already has such potential. These are companies for us that are low-income, so in this segment we do not want to participate and we do not want to compete, as I mentioned, with funds. We want to enter these greenfield contracts, these topics where we start and invest in the company from the beginning to the end. I think that such 100 megawatts, because it is a great value for our company from the beginning, and we have been dealing with it since the middle of last year, is possible to achieve only at the end of the year 2026 or even 2027.

Thank you for the answer. A question asked online from the BDM Mokrarski House. In the Czech Republic and Slovakia, in the event of a 100% decrease in materials, The valuation is also negative, without a limit. What are the average market margins in infrastructural contracts on these markets?

The Czech and Slovak markets are very similar to the Polish market. But I would focus here on the Czech market, because there is definitely a greater number of trade proceeds. There were only a few trade proceeds on the Slovak market, so it's hard for me to tell. However, the margin set by the company, we see that it is at a very similar level as in Poland, so from one to four percent. However, the valuation works very similarly in Poland, it is not limited, but it works in all directions.

Thank you for the answer. A question from MetLife TFI. In the context of the significant increase in construction costs and the need for renegotiation of contracts with customers, do you see a chance to maintain in the construction segment in 2022 the margin close to that of 2021?

After the first quarter, we see that we have a slightly smaller decline in the margin achieved in the construction segment. Today, I believe that it is definitely too little time has passed to be able to speak on this topic and say what the margin will be in the second quarter and what we will achieve at the end of the year. Of course, our goal is to maintain the budget that was established at the end of 2021 and maintain the same level of the margin. However, I believe that if we receive the valuation from key clients of the General Directorate and PKP PLK, it is possible to achieve. If we do not receive this valuation, it will of course have an impact on the margin of our company.

Thank you. A question from the editor Adam Roguski, Gazeta Parkiet. What is the annual income scale of the FBS company on the target? Is the goal of PLN 1 billion before 2026 maintained? I will start with the second part of the question.

Yes, we want to achieve PLN 1 billion by 2026. However, I will repeat it again, it will depend a lot on how much we will be able to invest, because we would not want to realize this mythical billion of zlotys from low-margin businesses, which we are able to gain to a large extent, certainly organically, but we would not want the FB Service to have a profitability of 4-5% EBIT in the year 2026. We would like this EBIT to be two-digit, specifically two-digit. And to achieve this, we will have to invest both organically and inorganically in waste processing plants. We actually have such a program ready. We are still calculating and summing up the necessary expenses, so I don't want to talk about it today. However, if we are to implement it by 2026, Even in the assumption that it will be primarily waste processing projects, we will not be able to do it organically due to long administrative procedures for our own investments, i.e. we will do a mix. We will invest in our own, we have a lot of our own areas that may be intended for this activity, so we have to take it into account. And now I move on to the first part of this question. So far, we have focused on relatively small entities. at the level of several dozen, i.e. less than PLN 100 million annually. In these big fairs, because the name is in this way, if we have large items on the market from this industry, which are for sale, these are open processes. Compared to competitive fairs. A consultant is selected, there is a normal competitive process. We are a very specific buyer. we feel better in such procedures and such processes, in which we can be from start to finish. And we also do not like to buy targets that are, it seems to us, overvalued. And these big companies, in fact, there is one transaction that will definitely be a reference this year, i.e. a transaction that should be made in a moment, the reception of the Krynicki Recycling company by an investor in the industry. This is also a company that we were interested in at a certain stage. There are other processes going on at the moment. However, we believe that these are already quotas and estimates that do not leave as much room to create value for us as an investor. Therefore, at least for now, we would like to focus on integrating and consolidating the market through the adoption of smaller entities. But because of this generation by our management and our money or money in our owners much higher added value. I would like to, and this is my dream, if I can have a dream, and I think I would like to take at least two items, even smaller, but every year. And from that plus our own investments, this billion can be collected without compromises in terms of profitability. I also think that we should not forget that FB Service is not only a waste management company, but the other businesses that we have, i.e. infrastructural ones, we do not have such an emphasis on increasing the scale at all costs, but rather selectively choose where and in which regions we want to develop, where we have it well recognized also in terms of the market for subcontractors, in order not to simply add to these contracts, because it hurts us very much when waste business, which for the last few years has kept the profitability of the company somewhere, it had to cover some non-profitable contracts outside its activity. So we want to effectively and consistently heal this portfolio all the time. Such situations will always happen. It is not that we have any possibility of not having non-profitable contracts in the portfolio. However, we want to draw conclusions. I think that's it.

Thank you very much. The next question is about foreign markets. Does the company still plan to expand to foreign markets? Is there a chance? And what would have to happen to convince the company to resign from these plans?

The company still plans to go outside the Polish market, i.e. to the Czech, German and Slovak markets. And here we are waiting for the settlement of these bids, what I was talking about, because these bids are taking a very long time when it comes to the Czech Republic, Slovakia. We also believe in profitability. We could probably achieve, as Artur mentioned, much better results when it comes to gaining, but it's not about winning bids, it's about earning money, funds and obtaining a contract that will be profitable for us. So here it is rather we make our offers very responsibly and in the segment mainly construction, infrastructure, where in the case of winning this contract, we are able to realize it on our own. And this will be our key when it comes to the fair. The second element when it comes to our term strategy. This is a long-term action and of course not based on such a wave of impulse, but we want to act long-term. And here I would not like to specify what period we are giving ourselves to win contracts and exist there, so it is rather a strategy, not rather, but it is a long-term and long-term strategy that, going beyond this area of ​​Polish, we exist on the German market for over 30 years. We also think here in the long term. That's why we set up our companies there, sub-company already at the moment. We have teams of people created in all these three countries, in all these three countries, so we look long-term.

Thank you very much. A question from online, more about the financial character. What part of the backlog of PLN 13 billion is threatened with loss at the current price of building materials? Do we see a risk that some of the material price insurance may be ineffective? Here, for example, the question is given, for example, the cement factory has recently demanded a compensation from the company of general execution. Historically, there was also a problem with steel suppliers.

We are on the move with each revision, and we carry out these revisions every quarter. We analyze the results on individual contracts. That is why reserves are created in the entire group. At the moment, it is difficult to say what the result will be on individual contracts, because all these contracts include contracts with both subcontractors and material suppliers. What is noticeable is that both we, as the main contractor, conduct conversations with the orderer, i.e. with the Ministry of Infrastructure. However, I do the same for subcontractors and suppliers from our company, i.e. Budimex. So we negotiate together. And so we have agreements and we are negotiating in such a way that when we get increased financing on the basis of valorization, and we have already reached this 5% level, then of course we will be cooperating with our partners, suppliers or subcontractors. So, to be able to answer you exactly on this question, This will happen after the next quarter. Thank you very much.

The next question is from the editor Elżbieta Pałys. Infrastructure market. What contracts are among those from which Budimex has resigned and which orderers?

There are many orderers. We have resigned from a contract worth over 1.5 billion PLN. in the order of the General Directorate of Railways and Autostrad, but the remaining 1.5 billion is from various orderers, from the PSA group, from the court in Katowice, through the authorities and many other institutions or private investors, where we did not sign these agreements. As I mentioned earlier, due to the fact that the costs, which have increased so much after February 24, showed that these contracts will be very unprofitable, so the loss on contracts will reach 20%, so we decided not to include these contracts.

Thank you very much. A question about the investment aspect, also from the PKO side. In what other areas besides OZE does the company plan to reinvest the remaining OZE sales funds? When can you expect investment decisions?

starting from the sale of real estate buildings, because we only want to buy OZE.

Apart from OZE, of course, we want to invest in many other segments. We have a lot of ideas. We started with the Startup Challenge program, so we want to invest in companies that we can very quickly gain synergy, cooperation. And here we see many possibilities. We want to invest in electromobility when it comes to OZE funds, but also in other activities, but mainly waste activities when it comes to OZE, because this is our key segment, where we see that it is not subject to such a sinusoid of action and what is happening on the construction market, so here we have a stable collection of waste materials and we believe that, of course, these actions that are taking place today in the world, i.e. wars in Ukraine and all these related difficult elements, we will still have to put green energy and waste processing as a world. And of course, to do everything to make our planet green. So here, mainly in this direction, we will want to focus.

Thank you very much. We have exhausted. We answered all the questions posted both online and before the meeting. Or maybe some more questions from the room? No, we don't see. So we answered.

Yes, yes. Thank you very much, ladies and gentlemen, for today's meeting. So, to sum up, maybe this quarter, so that you can also come out with the conviction that we are dedicating a lot of our energy and attention to improve this situation and of course we are optimists in what we do, so that it sounds good. This quarter was a quarter full of challenges for us, of course, but it also mobilized us to do even more. What will be the key element in the next quarter is of course the valorization of already implemented contracts and it will be a big challenge ahead of us. A big challenge will be the contract and here we are also focusing on getting the largest number of contracts and what we did not sign to get in the second part of the year, but also the EU funds. And here a very important element to be able to do it, of course, these are EU funds and we believe that these EU funds will finally hit the Polish market, because it will certainly improve the situation and the amount of investment will increase. Thank you very much. from our entire group.

Thank you very much. Thank you also to all the people participating online for all the questions and we invite you to the panel at the level of the Minutes.

All of you who are present in the room, we invite you to the panel. We apologize, we are not able to provide this electronic road, but All our next meetings will take place at the Value Paper Exchange, so we cordially invite you live. We are open to you. Thank you very much.